IRS Payment Arrangements Part 1: Introduction

This is the first part of a multiple part series on IRS payment arrangements. This blog will discuss some general points of IRS payment arrangements while future blogs will deal with their individual details.

Individuals whot cannot pay their tax debt within a reasonable time frame may request to make monthly payment arrangement with the IRS to satisfy their tax bill. There are several options, including an IRS installment agreement. As long as the tax debt is paid in full, taxpayers can avoid the penalties and interests associated with their tax debt. It is essential to know that before applying for any payment agreement, a taxpayer must file all required tax returns.

In addition to installlment agreements, the IRS may allow a taxpayer a short-term or a hardship extension of time to pay taxes upon proper request. The IRS also offers an arrangement known as an offer-in-compromise, which is rarely granted. Finally, the IRS may place an account in currently not collectible (CNC) status.

If a taxpayer enters into a payment arrangement, it is important that taxpayers understand the following to avoid default:

Future refunds will be applied to a tax debt until it is paid in full;

Payment must be made of an amount that is at least the minimum monthly payment due;

A taxpayer’s name, address, SSN, daytime phone number, tax year and return type must be included on any payment;

All required tax returns must be filed on time and all taxes must be paid in-full and on time;

All scheduled payments must be made even if the IRS applies a refund to a taxpayer’s account balance; and

Taxpayers must ensure that their statement is sent to the correct address.

Taxpayers cannot afford to wait for the IRS to institute some enforcement action before entering into a payment arrangement with the IRS, especailly since it has many enforcement mechanisms such as liens and levies to “encourage” payment. Recently, Congress enacted legislation allowing the State Department to deny, revoke, or limit the passport of a taxpayer that owes more than $50,000 in taxes and has not reached an agreement with the IRS to pay the debt.

If you owe back taxes, do not procrastinate any longer, take steps to pay your tax debt and reduce the inherent stress and aggravation, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704.